Unit 2.6 - Elasticity of Supply
What you need to know and understand:
Key concepts:
Concepts to understand:
- Price elasticity of supply (PES)
- PES = percentage change in quantity supplied / percentage change in price
- Degrees of PES—theoretical range of values for PES
- Determinants of PES—time, mobility of factors of production, unused capacity, ability to store, rate at which costs increase
- Reasons why the PES for primary commodities is generally lower than the PES for manufactured products [HL only]
Key concepts:
- Scarcity
- Choice
- Efficiency
- Equity
- Economic well-being
- Sustainability
- Change
- Interdependence
- Intervention
Concepts to understand:
- Interaction between consumers and producers in a market is the main mechanism through which resources are directed to meet the needs and wants in an economy..
- Consumer and producer choices are the outcome of complex decision-making.
- Welfare is maximized if allocative efficiency is achieved.
- Constant change produces dynamic markets.
TEXTBOOK unit 2.6
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